Between Pork and a Hard Place

What's the easiest way to balance the budget? Get rid of
"wealthfare," the practice of granting subsidies
and tax breaks to business. That message was delivered
earlier this year by "Stop Corporate Welfare"--an
unusually diverse coalition whose participants range from
consumer advocate Ralph Nader to House Budget Committee Chair
John R. Kasich (R-Ohio)--which named a "dirty
dozen" of federal subsidies they believe should be
amputated from the budget.

The call to chop business subsidies taps into public
cynicism about politicians who empty the tables of poor
families while heaping corporate pork on the plate of wealthy
companies. Estimates of the annual cost of direct federal
subsidies and tax breaks to companies vary from $87 billion
(the conservative Cato Institute) to $150 billion (The
Boston Globe, in a three-part series on corporate welfare
last summer). Core social welfare programs, in comparison,
cost $145 billion annually.

Trimming business subsidies, in line with other efforts to
balance the budget and downsize government, garners popular
support across the spectrum. It makes one wonder why the
issue of corporate welfare has not been summarily dealt with.
In practice, its not quite so easy.

Various definitions of corporate welfare have surfaced.
Most agree that it includes direct grants and loans from
government to businesses. Unlike the stringent accountability
requirements for low-income recipients of welfare assistance,
there are often no reporting requirements for these
subsidies.

Politicians dissent, however, about other forms of
subsidy. Conservatives balk at calling tax concessions a form
of corporate welfare, even though these disproportionately
benefit businesses. According to the Office of Management and
Budget, the corporate share of taxes has declined to
one-fourth the amount that individuals pay, with a parallel
trend occurring at the state level.

The system of campaign finance offers further clues about
the failure to deal decisively with corporate welfare. Former
Labor Secretary Robert Reich said, "Companies and
industries have managed to effectively lobby for their little
piece of public largesse. Why have they been so effective?
Because they support campaigns." The result is that
programs that lack influence rather than value are the first
to be excised.

ITS OBVIOUS THAT the system of corporate welfare
needs to be reformed. But we must consider why subsidy
programs were set up in the first place. Ideally, government
employs tax breaks and spending in order to persuade
businesses to undertake efforts for the common good. The
market knows the price of everything and the value of
nothing, and so governments must offer enticements for
companies to pursue externalities such as environmental
conservation, research and development, and provision of
services to rural areas or marginalized groups.

Rob Weissman of The Multinational Monitor believes
that there is a flaw in the framework of the debate.
"Although we shouldnt be afraid of criticizing
corporate welfare," Weissman said, "there is a
danger that we slide into criticism of government
intervention on principle." Often its hard to
distinguish between corporate pork and a subsidy that
encourages companies to contribute to the commonwealth,
because the two may overlap substantially. Thus
positive-sounding rhetoric about eliminating corporate
welfare can mask a slash-the-government agenda.

The "dirty dozen" hit list put forward by Stop
Corporate Welfare included the Rural Utilities Service,
subsidized water supplies for farmers of low-value crops, and
clean-coal technology programs. It did not mention subsidies
to the oil or defense industries. Weissman explained that
Nader did not endorse the list in its entirety because it
included the Rural Utilities Service, which has been
instrumental in providing electricity to poor rural areas.
Although there are now instances of abuse, this type of
subsidy has the potential of advancing the health of the
whole community. As we work at cleaning up the murky
bathwater of corporate welfare, we need to be careful that we
retain the baby.

Instead of cutting subsidies altogether, organizations
such as the Minnesota Alliance for Progressive Action offer
suggestions on how to monitor corporate welfare for public
gain and induce companies to meet their obligation to
society. The widespread attention to this issue creates space
in the public discourse for us to alter the shape of the
debate. It can be a much-needed opportunity to ask questions
about the role of public assistance, the power of
corporations, and the responsibility of companies to their
workers and communities.

Like what you're reading? Get Sojourners E-Mail updates!

Sojourners Comment Community Covenant

I will express myself with civility, courtesy, and respect for every member of the Sojourners online community, especially toward those with whom I disagree, even if I feel disrespected by them. (Romans 12:17-21)

I will express my disagreements with other community members' ideas without insulting, mocking, or slandering them personally. (Matthew 5:22)

I will not exaggerate others' beliefs nor make unfounded prejudicial assumptions based on labels, categories, or stereotypes. I will always extend the benefit of the doubt. (Ephesians 4:29)

I will hold others accountable by clicking "report" on comments that violate these principles, based not on what ideas are expressed but on how they're expressed. (2 Thessalonians 3:13-15)

I understand that comments reported as abusive are reviewed by Sojourners staff and are subject to removal. Repeat offenders will be blocked from making further comments. (Proverbs 18:7)